State of Cannabis: Washington

This is proving to be a big year for cannabis. As a result, we are ranking the fifty states from worst to best on how they treat cannabis and those who consume it. Each of our State of Cannabis posts will analyze one state and our final post will crown the best state for cannabis. As is always the case, but particularly so with this series, we welcome your comments. As a result of the overwhelming success of many cannabis initiatives this November, all the remaining states in this series have legalized the adult use of recreational marijuana. This week we cover Washington, who along with Colorado, was the first to legalize recreational marijuana.

Washington

Recreational marijuana. Washington State legalized the recreational use of marijuana in 2012 when its citizens voted to pass of Initiative 502. Under Washington State law, adults over the age of 21 can legally possess up to one ounce of marijuana flower, sixteen ounces of marijuana-infused product in solid form, seventy-two ounces of marijuana-infused product in liquid form, or seven grams of marijuana concentrate. The Washington State Liquor and Cannabis Board regulates Washington’s cannabis market, creating and enforcing rules regarding marijuana.

Washington’s marijuana market mainly consists of three different license types: producer, processor, and retail licenses. To a certain extent, cannabis licensees cannot vertically integrate because an individual cannot have an interest in all cannabis licensing types. A retail license holder may have no interest in a producer or processor license. However, a licensee may possess both a producer and processor license. To qualify for any Washington State cannabis license, one must have at least six months of residency in Washington State.

Washington State requires residency compliance from anyone who qualifies as a “True Party of Interest,” which means anyone who either exercises “control” of the cannabis company (control is not defined) or who receives or is entitled to receive either net or gross profits from a licensee. By way of a couple examples, True Parties of Interest include anyone who holds stock in a corporation and it includes the spouses of any stockholders. Every True Party of Interest in a Washington State cannabis business must be vetted by the Liquor and Cannabis Board and must have resided in Washington for at least six months, same as a cannabis licensee. Failure to disclose a True Party of Interest leads to instant cancellation of a license.

The Washington State Liquor and Cannabis and Cannabis Board is not currently accepting applications for cannabis producer, processor, or retail licenses. This means Washington’s cannabis market is currently closed to newcomers seeking a new license, but it it not closed to those seeking to get into the Washington State cannabis industry by buying outright or by buying into an existing licensed Washington State cannabis business.

Medical Marijuana. In November of 1998, Washington voters approved Initiative 692, providing legal immunity to patients using medical marijuana. In 2011, the Washington State Legislature passed SB 5073, allowing patients to possess up to 15 cannabis plants and 24 ounces of usable cannabis. The bill required the Washington State Departments of Health and Agriculture to register and license cannabis dispensaries. However, those provisions and various other provisions relating to dispensaries were vetoed by then-Governor Christine Gregoire. What was left was a semi-legal gray medical marijuana market.

I-502 created a legal recreational cannabis market independent of the existing medical market. This dual channel cannabis system radically changed in 2015 when the Washington State Legislature merged Washington State’s medical and recreational cannabis markets by passing SB 5052 and HB 2136. Among other things, these two new laws required both recreational and medical marijuana in Washington State be produced, processed, and sold by licensed cannabis entities.

Today, Washington State retail cannabis stores must obtain a medical marijuana endorsement to sell medical cannabis, though there is no legal distinction between recreational and medical cannabis itself. Instead, the distinction between recreational and medical cannabis is “in the eye of the beholder,” meaning that if a medical patient who obtains authorization from a health care professional uses cannabis to treat his or her ailment, it is medical.

The amount of medical marijuana a patient can possess depends on whether the patient decides to register with the state’s medical marijuana database. Medical cannabis patients who register in the medical marijuana database may purchase the following amounts of cannabis, free of sales tax, from a medically endorsed retail store:

Three ounces of usable marijuana

Forty-eight ounces of marijuana-infused product in solid form

Two hundred sixteen ounces of marijuana-infused product in liquid form or

Twenty-one grams of marijuana concentrate

Patients in the Washington State medical marijuana database are also allowed to grow from six to fifteen plants, as recommended by their doctor, and possess up to eight to sixteen ounces of marijuana produced from those plants. Patients who elect not to enter the Washington State medical marijuana database may purchase only the amounts allowed for recreational users and grow four to six plants for medical use and possess up to six ounces of usable marijuana from those plants. These patients also do not get to purchase their cannabis (even if for medical use) free of sales tax.

Bottomline. Washington is a pioneer in the movement to reform marijuana laws. Though it has a one of the most sophisticated marijuana markets in the country and really good cannabis laws overall, Washington does not quite rise to the very top of our state cannabis ranking. This is because the two remaining states, Colorado and Oregon, have implemented legal marijuana in a way that is more patient-friendly and that allows for greater competition among licensed marijuana entities and generally lower prices to the consumer. But the difference between Washington and the remaining two states is minuscule, as all three of these states (Washington, Colorado and Oregon) have extremely favorable cannabis laws, that truly are considerably better and more established than any of the other states. Washington State’s excellent marijuana laws and its overall tenor of enforcement make Washington number three in our State of Cannabis series.

With a foundation in advocacy for cannabis legalization built through involvement on University of Washington’s campus and with the Washington State Liquor and Cannabis Board, Daniel has positioned himself as a fearless advocate for the cannabis industry.

Please Join Us in San Francisco for the California Cannabis Investment Forum on September 28!

About this Blog

The Canna Law Blog is a forum for discussion about the practical aspects of cannabis law and how it impacts those involved in this growing industry. We will provide insight into how canna businesspeople can use the law to their advantage…

Disclaimer

Please be mindful that possessing, using, distributing and selling marijuana are all federal crimes and that this blog is not intended to give you any legal advice, much less lead you to believe that marijuana is legal under federal law. Please also note that even though marijuana is illegal under federal law, you will need to pay federal taxes just as though you are a legal entity. This is true even if you are a state law not-for-profit entity.

The Canna Law Group is a team of business attorneys focusing on the corporate, compliance, intellectual property, and consumer product issues impacting the cannabis industry. We represent medical and recreational businesses in multiple states, and we continue to offer our clients the proactive approach and strategic edge that this unique industry demands.